Assured Guaranty Q2 Earnings Call Highlights

Key Points

• Strong first-half growth: Assured Guaranty’s first-half present value of new business production rose 48% year over year to $152 million, led by $106 million from U.S. public finance and increased global structured finance activity.
• Improved quarterly earnings: Second-quarter adjusted operating income increased to $55 million, or $1.23 per share, as higher premium income and lower loss expense helped offset economic loss development tied primarily to Brightline.
• Capital priorities are shifting: The company repurchased $45 million of stock and paid $17 million in dividends, but management said future capital deployment may increasingly support growth, including the expanding Assured Life Re annuity reinsurance platform.

Assured Guaranty NYSE: AGO reported higher second-quarter adjusted operating income and record per-share valuation metrics, while executives pointed to growth in U.S. public finance, global structured finance and the company’s newer annuity reinsurance platform.

Chief Executive Officer Dominic Frederico said the company had a “strong first half of 2026,” with shareholders’ equity, adjusted operating shareholders’ equity and adjusted book value per share all reaching record highs at quarter-end. He said production across the company’s financial guarantee operations generated $152 million in present value of new business production, or PVP, during the first half, nearly 50% above the comparable period of 2025.

Production Growth Led by Public Finance and Structured Finance

Chief Operating Officer Rob Bailenson said first-half PVP rose 48% from $103 million a year earlier to $152 million. U.S. public finance generated $106 million of PVP, exceeding the company’s total first-half PVP in 2025.

Assured Guaranty insured $9.6 billion of new-issue municipal bond par during the first half across 423 transactions. Including primary and secondary-market business, the company insured more than $10.1 billion of U.S. public finance par, according to Bailenson.

The company insured 17 transactions with par amounts of at least $100 million, including:

• $870 million for the Dormitory Authority of the State of New York;
• $330 million of student housing revenue bonds for the Kentucky Bond Development Corporation;
• $297 million of airport senior revenue bonds for the Burbank-Glendale-Pasadena Airport Authority; and
• $102 million of taxable bonds for Brown University Health.

Within the AA category, Assured Guaranty insured $2.8 billion of par across primary and secondary transactions in the first half. Bailenson said the company believes investors continue to view its insurance as protection against issuer headline and downgrade risk and as a way to help preserve market value.

Global structured finance PVP increased to $35 million from $15 million in the first half of 2025. Bailenson attributed the performance primarily to fund finance and financial guarantees used for life insurance capital management purposes. He said fund finance transactions generally have maturities ranging from a few months to slightly more than two years, allowing the company to earn premiums faster and recycle capital more quickly than in many of its longer-duration markets.

Non-U.S. public finance activity included a U.K. local authority secondary transaction, annual extensions of liquidity facilities, a regulated utility in Spain and a primary social housing transaction in France. Bailenson said the company had already issued policies or commitments during the third quarter on several large U.S. public finance transactions, a primary-market European toll road transaction and several structured finance transactions, including two involving a new counterparty. Those transactions are expected to generate $42 million of PVP.

Second-Quarter Earnings and Credit Developments

Chief Financial Officer Ben Rosenblum reported second-quarter adjusted operating income of $55 million, or $1.23 per share, up 22% on a per-share basis from the prior-year quarter. Adjusted operating income increased from $50 million a year earlier, driven primarily by stronger premium income and lower loss expense.

Net earned premiums rose due to higher refundings and higher scheduled net earned premiums, Rosenblum said, with shorter-duration strategies such as fund finance contributing to the increase. Loss expense declined to $4 million in the second quarter from $28 million in the same quarter of 2025.

The largest source of economic loss development during the quarter was the Brightline transaction, although Rosenblum said it did not affect adjusted operating income because expected losses had not exceeded deferred premium revenue. He said Brightline continued to face liquidity pressure and that Assured Guaranty was working with the company and other creditors on a solution.

Rosenblum said a move of Brightline into the company’s surveillance category three would require claim payments to begin. He said the company remains committed to the asset, citing Brightline’s year-over-year gains in boarded passengers and revenue, as well as the insurer’s position near the top of the capital structure.

There were no significant second-quarter developments related to the company’s Thames Water exposure that affected its expected-loss scenarios, Rosenblum said. The company expects to work with the new administration to implement a solution negotiated by the creditor group and the U.K. regulator.

Alternative Investments, Capital Deployment and Life Re

Alternative investments recorded a second-quarter decline due to a $19 million mark-to-market loss on an investment in a collateralized loan obligation equity fund, which is reported with a one-quarter lag. Rosenblum said other alternative investments performed well and delivered relatively consistent results.

Frederico said some of the mark-to-market decline had already begun to reverse in the following quarter. Management said it remains committed to the diversified alternative-investment strategy, which had generated an inception-to-date annualized internal rate of return of about 12%, compared with a 4.3% three-year average yield on the company’s fixed-maturity portfolio.

During the second quarter, Assured Guaranty repurchased 554,000 shares for $45 million, or an average price of $80.68 per share, and paid $17 million in dividends. Since launching its repurchase program in 2013, the company has repurchased $6 billion of stock, representing 81% of shares outstanding when the program began, Rosenblum said.

At quarter-end, adjusted operating shareholders’ equity per share was $129.94 and adjusted book value per share was $189.72, both records. Holding-company liquidity stood at about $179 million at the time of the call, including $60 million at AGL.

Executives said capital deployment could increasingly favor business growth opportunities over buybacks as the company expands geographically and enters additional products and counterparties. Frederico said Assured Life Re, the company’s annuity reinsurance platform launched in January, has received favorable market reception and could book business more quickly than initially projected, potentially requiring more capital earlier in its development.

Frederico also said the company’s exploration of a “soft capital” facility remained a 2026 event and could provide greater flexibility in capital allocation decisions. He said management would continue to compare the value of new business opportunities, balance-sheet capital and share repurchases when determining how to deploy capital.

About Assured Guaranty (NYSE:AGO)

Assured Guaranty Ltd is a Bermuda-domiciled provider of financial guaranty insurance and reinsurance products serving public finance, infrastructure and structured finance markets. The company's primary business activity is credit enhancement, whereby it guarantees the timely payment of principal and interest on debt obligations issued by municipal and infrastructure entities. By combining rigorous risk assessment with active portfolio management, Assured Guaranty helps issuers access capital at more attractive rates while protecting investors against credit events.

In its public finance segment, the company underwrites municipal bond insurance for state and local governments, public-private partnerships and essential infrastructure projects.

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